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Corporate Compliance Programs: The Importance of Being Effective

Now more than ever, pharmaceutical companies must not only have an effective Corporate Compliance Program in place, but senior management and boards of directors at these companies must ensure that their Corporate Compliance departments evaluate the effectiveness of those Programs.

The federal government has sent numerous signals of its intent to hold the highest levels of pharmaceutical companies accountable for compliance program effectiveness. Unconvinced that the industry is changing its practices in the wake of an onslaught of enforcement actions that have resulted in record amounts of monetary recoveries, the government has turned to more novel remedies in its pursuit of fostering what it perceives to be a need for change in the corporate culture at pharmaceutical companies.

2012 saw monetary recoveries against pharmaceutical companies reach new heights. Two more companies crossed the billion-dollar threshold. GlaxoSmithKline paid $3 billion to settle allegations of off-label promotion of multiple products and failing to report safety data about the diabetes treatment rosiglitazone (Avandia) to the Food & Drug Administration. Abbott Laboratories paid $1.5 billion to settle allegations of off-label promotion of the anti-seizure medicine divalproex (Depakote). GSK and Abbott joined Pfizer and Lilly, who in 2009 became the first two companies to pay more than a billion dollars to settle allegations of wrongful off-label drug promotion.

These recent pharmaceutical company settlements propelled the U.S. Department of Justice (DOJ) to a second straight year of record recoveries under the False Claims Act in fiscal year 2012, which doesn’t even include the Abbott settlement (this will be reflected in fiscal year 2013 numbers). The False Claims Act is the primary law used by the DOJ to pursue companies accused of receiving monies from the federal government under false pretenses. Since federal and state governments spend billions of dollars on these medicines through Medicare and Medicaid programs, there is intense interest in curtailing off-label promotion and the excessive prescribing that comes from it.

But the government has expressed concern that even these billion-dollar settlements are not changing the behavior of the pharmaceutical industry. Statements made repeatedly over the last few years by officials at the DOJ and the Office of Inspector General (OIG) of the Department of Health and Human Services indicate that the government will continue to use other tools in its enforcement arsenal to change corporate behavior.

At a January conference in Washington, D.C., a U.S. Attorney who oversaw the Abbott prosecution stated that the government wanted more and different criminal remedies to bring about change to the corporate culture at Abbott.

As part of its Plea Agreement, Abbott agreed to five years of probation and Abbott’s CEO must annually “conduct a review of the effectiveness” of the Abbott Compliance Program. Based upon that review, the CEO must submit to the probation office a signed certification that (1) Abbott’s Compliance Program included the policies and procedures required by the Plea Agreement and (2) Abbott reported to the probation office all events that would be considered a probable violation of the prohibition on the misbranding of a drug.

The Plea Agreement also requires that the Abbott Board of Directors review the effectiveness of the Abbott Compliance Program. Based upon that review, the board must submit to the probation office a resolution adopted by the board stating that Abbott had in place policies and procedures designed to prevent Abbott from misbranding its drugs.

Requiring a review of the effectiveness of a Corporate Compliance Program can be traced back to OIG Corporate Integrity Agreements (CIAs) with Novartis (2010) and Bayer (2008). Both corporate integrity agreements require that an independent expert conduct a “Compliance Program Review” to evaluate the effectiveness of the companies’ programs. Both corporate integrity agreements also require board of director resolutions and management certifications similar to those found in the Abbott plea deal.

Interestingly, the Abbott Corporate Integrity Agreement does not require review by an independent expert but does require that the board review the compliance program and adopt a resolution concluding that the company has implemented an effective program. Neither does the Office of Inspector General’s most recent corporate integrity agreement – finalized with Amgen in December – require independent review of compliance program effectiveness.

Companies that implement policies and procedures guided by the language of the PhRMA Code on Interactions with Healthcare Professionalshave taken a significant step toward building an effective compliance program. Nevertheless, the PhRMA Code also encourages companies to undertake external verification that the policies and procedures actually foster compliance with the Code.

When it updated the Code in 2008, PhRMA created a mechanism to allow companies to submit a statement of external verification to the trade association, but this constitutes but one piece of a bigger evaluation puzzle. Recent corporate integrity agreements require extensive monitoring of interactions with healthcare professionals to verify their employees’ compliance with its policies and procedures. The corporate integrity agreements also require that companies hire independent review organizations to assess compliance with the agreements’ terms, or in other words, to evaluate the effectiveness of the compliance program.

Taken together, these various pieces guide companies in the development of an overall strategy for evaluating compliance program effectiveness.

Brian Dahl is the senior director and practice lead for corporate compliance and ethics at ProPharma Group. Follow @